Final answer:
The rate of return on an investment that grows from $20,000 to $67,000 over 15 years is approximately 9.6%. Therefore, the correct answer is C. 9.6%
Step-by-step explanation:
To calculate the rate of return on your investment, the formula you need is derived from the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested in years.
In your case, the investment grew from $20,000 to $67,000 over 15 years. We will assume the interest is compounded once a year (n = 1), so the formula simplifies to:
67,000 = 20,000(1 + r)^15
The rate r is what we are solving for, and through financial calculators or algebraic manipulation, you will find that the annual compounding rate of return is approximately 9.6%.
Therefore, the correct answer is C. 9.6%